City flat owners face downward price spiral as desperate neighbours sell at rock-bottom sums... and devalue the whole block in the process

Flat owners in Britain's cities have had a torrid time in recent years, as leasehold complications, service charges and cladding have made their properties a challenge to sell. 

But now they are being handed another headache, as their neighbours who decide to cut their losses effectively push down the prices of flats around them even further. 

Deciding they cannot wait any longer for the market to recover, some flat owners are opting to sell at deeply reduced prices. 

But this creates a problem for their neighbours, because it effectively sets a guide price for the next property which comes up for sale in the building. 

It could also create problems for those trying to remortgage their own flats, because lenders value properties by comparing them to others in the vicinity. 

If the price of those has plummeted, they may refuse to lend the homeowner the amount they need.

Sales take a long time to complete and even longer to show up on Land Registry records, meaning that until recently official data has not reflected the true extent of price falls. 

However, it is now starting to filter through and the trend is looking bleak. The average price of an inner London flat has fallen £46,000 in the year to August, according to Land Registry figures.

Buyers are now able to see these figures more clearly, and many will adjust their offer prices accordingly. 

How much are flat prices falling? 

Nearly four in ten London flats during the year to August changed hands for less than their previous purchase price, according analysis by E Surv Chartered Surveyors.

This excluded brand new properties and looked at flats that had been owned for between five and ten years. 

It also found around one-third of flats resold in both the South East and East of England changed hands for less than their previous purchase price, compared with just over one quarter across Britain as a whole.

Those who bought a new build flat recently are even more likely to have seen the value fall.

Separate analysis of Land Registry figures by property data site Where To Live found that 71 per cent of London flats bought new between 2020 and 2022 and resold between January and June 2026 sold below the purchase price. 

Individual listings on property websites also paint a concerning picture.  A two bed, two bath flat in a large purpose-built development in South Kensington in London is on the market for £750,000. The owner paid £1.06million for it 14 years ago, in 2012. 

Another two bedroom two bathroom flat in Clapham is currently on the market at £312,500 having been initially listed at £625,000. It was bought for £483,300 in 2020.

And a three-bedroom flat in a riverside block of flats in Battersea with parking, concierge and gym facilities is currently listed for £950,000 having been gradually reduced from £1.85million. The current owner bought it for £1.65million.

Other major cities are also seeing flat prices plummet. A large two bedroom flat in Axis Tower in central Manchester is listed at £350,000 having been reduced from £500,000. The current owner bought the flat for £480,000.

And in Birmingham, a modern one bed flat in a large apartment block in the city centre is currently listed for £90,000 having been reduced from £140,000. It was previously bought for £163,950 in 2018.

Philip Jackson, director of Maguire Jackson estate agents in Birmingham, says there is currently an over-supply of flats with more and more people trying to sell and nowhere near enough willing buyers.

He says: 'Many sellers of good but ordinary one and two-bedroom modern apartments, built within the last twenty years, are essentially competing against other sellers within the same building to secure buyers, alongside a plethora of other apartments available for sale locally.'

As well as issues with leasehold and service charges, high mortgage rates and economic uncertainty have also put off some first-time buyers which has dampened the market for flats. 

Landlords are also less keen to buy, thanks to increased regulations and higher taxes. 

The average estate agent currently has around 12 to 13 flats for sale, which is up from around eight per estate agent in 2019, according to Zoopla. 

Could it stop flat owners getting a mortgage?  

Most buyers need a mortgage in order to buy a property. Before offering a mortgage, a lender will require a valuation.

Often, the valuer doesn't look at the property in person. Instead, they base it on what other homes are selling for in the area - or in this case, the same block of flats. 

If neighbouring properties have sold for a much lower price than what a potential buyer is proposing to pay, they might refuse the mortgage. 

This can also push current owners into remortgage issues, or even negative equity which is where the value of their property falls below that of the mortgage they have borrowed.

Estate agent Nicholas Austin, branch manager at RiverHomes in London, says: 'If you once took out a loan that covered 60 per cent of the flat’s value and it now represents 80 per cent of the flat’s value, you’re going to pay a higher rate. 

'There is also a risk of negative equity, if someone has bought a flat with a 5 per cent deposit and then it has reduced in value 10-15 per cent. 

'That is a risk to borrowers of either getting stuck in their home for a long while and end up on some high mortgage interest rates, or standard variable rates even.'

Flat owners are also facing a service charge tipping point that could render their homes unsellable and unmortgageable.

Some banks have tightened their rules and now won't offer mortgages on flats where the annual service charge exceeds 1 per cent of the property's value.

This is because a high service charge could have an impact on how easily a lender could sell the property were it to be repossessed.

In 2025, some 37 per cent of flats had an annual service charge exceeding 1 per cent, according to property firm Hamptons, up from 28 per cent a decade earlier.

It means a mortgage application on a flat valued at £300,000 with an annual service charge of £4,000 could be refused by some lenders.

Fed up of waiting: Some flat owners are opting to sell at deeply reduced prices as they cannot hold on for the market to recover 

Why flat owners in big blocks risk 'downward spiral'

Flat owners living in big apartment blocks of 100 flats are particularly at risk from the knock-on effect of price cuts, say experts. 

There are examples of some such flats in central London slashing their asking prices multiple times, sometimes by as much as 40 per cent.

But it isn't just a London issue. 'We very recently recorded a one-bedroom apartment with parking in a good block near the city centre selling for £55,000 at auction, against an original marketing price of £140,000 only six months earlier,' says Birmingham estate agent Philip Jackson.

The issue with bigger apartment blocks is there are lots of identical one and two bed apartments of the same size and specification. 

This makes them easy to value, because there are lots of recent sale prices to compare them to. This works in sellers' favour if prices are going up, but can create a downward spiral when the market turns.

'The bigger the development, the bigger the problem,' says London agent Nicholas Austin.

'If there are 200 identical properties, at least seven of them will be on the market at any given time.' 

'If one property has slashed its price by 10 per cent, all the others will have to reduce their price by 10 per cent too because these flats are identical.'

'Why would someone pay more? Unless one flat has a better view or has been upgraded in some way, every flat in that development will be worth whatever the cheapest one on the market is.'

Estate agent Nicholas Austin, branch manager at RiverHomes in Putney, London

What about flat conversions?

Older flats, including those in converted houses and mansion blocks, should be less at risk. 

They tend to have lower service charges and don't have dozens of identical properties in the same building. 

'Flats in Victorian mansion blocks, school conversions or even flats carved out of bigger houses are slightly less vulnerable,' says Austin.

'The market for flats is depressed everywhere but at least with older flats and conversions, they are each unique and different. 

'They don’t suffer from the identikit issues that affect new build flats.'

Property finance specialist Chris Sykes of MSP Financial also thinks sellers of smaller flat conversions are likely to be better off.

'These seem to be the properties people want to buy now, rather than the big tall shiny flats, which could be down to service charges and potential shares of freehold available,' he says.

Will it get worse?

This is by no means a new phenomenon. UK flat prices have only risen 7 per cent on average over the past decade while the average house is up 36 per cent, according to Zoopla.

The gap between the average house price and flat price has risen from £108,096 in 2016 to £192,533 in 2026. The gap between them is at a 30-year high.

Birmingham estate agent Philip Jackson thinks the recent drop in flat prices shows there is limited demand for leasehold apartments. He thinks the main issue is a lack of confidence. 

'The possibility of rising interest rates and higher taxes from the Chancellor certainly isn’t helping today,' says Jackson.

'For tenants in stable jobs, it seems an obvious choice to buy because there are savings in rent to be made, but tenants are being shielded from the service charges and it is this additional cost which is impacting on some potential purchasers.

'Investors now urgently need to be encouraged by the Government to keep hold of their flats and stay in the market. 

'This will greatly alleviate the flooding of stock onto the sales market and put some brakes on the prices.'

London estate agent Nicholas Austin also attributes much of the current pain in the capital to buy-to-let landlords and other desperate sellers slashing prices just to get their property sold. However, he now thinks the market is reaching its nadir. 

'The Renters Rights Act which came into force six months ago saw a lot of buy-to-let landlords exit the market,' says Austin.

'Those flats are slowly but steadily finding buyers so the blood letting is being stemmed. 

'Professional landlords are actually seeing the current market as a terrific buying opportunity but there aren’t a lot of those. Rather than a falling market, we’re entering a stagnant market.'

How to find a new mortgage

Mortgage rates have jumped as conflict with Iran has driven up inflation expectations and dashed hopes of interest rate cuts.

If you need a mortgage because you are buying a home, or your current fixed rate deal is due to end, you should explore your options as soon as possible.  

This is Money has a long-standing partnership with fee-free broker L&C, to provide you with expert mortgage advice.

Use This is Money and L&Cs best mortgage rates calculator to show deals matching your home value, mortgage size, term and fixed rate needs.

Or use L&C’s online Mortgage Finder to search thousands of deals from more than 90 different lenders to discover the best deal for you.

Mortgage service provided by London & Country Mortgages (L&C), which is authorised and regulated by the Financial Conduct Authority (registered number: 143002). The FCA does not regulate most Buy to Let mortgages. Your home or property may be repossessed if you do not keep up repayments on your mortgage